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Explaining differences in income levels of Africa's largest economies: A development accounting perspective

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  • Ibhagui, Oyakhilome

Abstract

Drawing upon t8he experience of Africa’s largest economies, this paper examines the phenomenon of income discrepancies in Africa and applies the combined methodologies of Development Accounting (DA) à la Caselli (2005) and Business Cycle Accounting (BCA) à la Chari, Kehoe and McGrattan (2007) in a standard neoclassical, small open economy model. Classified into 2 equal-numbered groups–G1 and G2–based on output size and region of location, the economies comprise Sub-Saharan Africa’s top 3 economies (G1: Nigeria, South Africa and Angola), and North Africa’s top 3 economies (G2: Egypt, Algeria and Morocco). Distortions in production efficiency, labour and capital, collectively termed wedges, are calculated, and the extent, evolution and impact of the wedges determined for the period 1990 to 2013. Empirical results show that although efficiency wedge plays an important role in explaining income differences, labour wedge and investment wedge are also important for understanding income differences in Africa and, by extension, bridging the gap.

Suggested Citation

  • Ibhagui, Oyakhilome, 2019. "Explaining differences in income levels of Africa's largest economies: A development accounting perspective," International Journal of Development and Conflict, Gokhale Institute of Politics and Economics, vol. 9(2), pages 216-248.
    • Handle: RePEc:gok:ijdcv1:v:9:y:2019:i:2:p:216-248
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    Keywords

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    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • N17 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Africa; Oceania
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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